The German Economy in the Twentieth Century (Routledge Revivals)

The German Reich and the Federal Republic

Hans-Joachim Braun

• Publisher: Routledge
• Year: 2010
• Print ISBN: 9780415609593
• eBook ISBN: 9781136836435
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

First published in 1990, this book traces the logic and the peculiarities of German economic development through the Weimar Republic, Third Reich and Federal Republic, providing a comprehensive analysis of the period. The book also assesses controversial issues, such as the origins of the Great Depression; the primacy of politics or economics in the decision to invade Poland and the future risks to the Weltmeister economy of the Federal Republic oppressed by unemployment; the huge debts of some of its trading partners; and the possibility of worldwide protectionism.

PART I:
1871–1948

Chapter One
THE ECONOMY OF THE KAISERREICH, 1871–1914

Looking at Germany’s economic development in the period 1871–1914 the figures are indeed spectacular: Germany’s industrial production rose sixfold, whereas France could only treble and England could only double their industrial production. Between 1870– 1913 German steel production grew more than tenfold.¹ By 1870 the phase of early industrialisation had come to an end and, during the period 1870–1913, the transformation from an “agrarian state” to an “industrial state” took place. The secondary sector, with industry, small trade and mining, overtook the primary sector. In 1871, 49 per cent of the German population had still been employed in agriculture; this figure declined to 35.2 per cent in 1907. In the same period the figure of those employed in industry rose from 31 to 40 per cent.

The transformation from an agrarian society to an industrial society did not happen without friction and was not completed at the outbreak of the First World War. There were still remnants of the old feudal society: most of the leading positions in diplomacy, state bureaucracy and the armed forces were reserved for members of the traditional ruling elite.

The German population grew from 41 million in 1871 to 49.7 million in 1891 and 65.3 million in 1911. Until the 1880s population growth had mainly been due to an increasing birth rate. From then onwards, birth rates declined, but mortality declined even further, mainly because of better medical provisions. Migration also played an important role. Until the beginning of the 1890s Germany had insufficient job opportunities for the rising population. This problem of insufficient jobs in industry was at the centre of the “social question”.² Emigration, especially to North America, exceeded immigration.³ With improving job opportunities in Germany the picture changed, however. There was increasing immigration into Germany by people of various nationalities. Of particular importance were the “Ruhr Poles” who found employment in the Ruhr industrial region.⁴

German agricultural production and productivity improved substantially in the late nineteenth and early twentieth century. Agricultural machinery in use rose about fourfold between 1880 and 1914 and the extensive use of fertilizers made higher agricultural yields possible.⁵ In spite of this, German agriculture was in grave difficulties. After 1870 there was a rapid decline in grain prices on the European market mainly due to cheap American imports. The political turn to protectionism in 1878/9 tried to ease agricultural problems. As a result German farmers, especially the large estate owners in the East, were partly shielded from the world market with the consequence that the process of de-agrarianisation in Germany was slowed down.

Although German heavy industry, together with agriculture, successfully demanded a protectionist German foreign trade policy, German industry as a whole rapidly increased its share of the world market. This is particularly true of the “new industries”, mainly the chemical, electrical, optical and high-precision engineering industries as opposed to the traditional consumer-goods industries, especially textiles. These “new”, science-based industries depended to a large extent on the rapid expansion of applied science and technology in German universities and especially in Institutes of Technology (Technische Hochschulen). A high standard of technical education⁶ and the foundation of governmental research and development institutes were, however, only one prerequisite for the rapid expansion of the new industries. Other factors were industrial concentration, in which the major German banks played an important role, and a state policy of assisting industrial growth. Germany had the advantage of a late start in industrialisation as compared to Britain. German entrepreneurs were in a position to avoid mistakes made by their colleagues of the “first industrial nation” and concentrated on the development of new industries while neglecting “old” ones such as the textile industry. The fact often deplored by contemporary observers that Germany had hardly any colonies implied the advantage that German entrepreneurs could not rely on colonies for imports and especially exports, and had to cope with the vagaries of and the keen competition on the world market.⁷

Concentration and cartelisation are not necessarily prerequisites for a superior industrial performance. They can make corporations inflexible and slow, and this often happened in the late nineteenth and early twentieth century. As a whole, however, German industrial concerns were—with exceptions—quite competitive on the world market. One of the reasons for concentration and cartelisation was the so-called “Great Depression” of the late nineteenth century⁸ which caused corporations, especially in mining and iron and steel production, to regulate prices, production and sales. The banks played an active role in this process in their attempt to safeguard their loans and investment.⁹

Often the German economic system of the late nineteenth and early twentieth century is called “organised capitalism” as opposed to the “capitalism of free competition” which is supposed to have preceeded it.¹⁰ The main features of “organised capitalism” are the concentration of capital, market regulation by formal, hierarchical and bureaucratic administrations, increasing pressure of organised interests to influence state political decision-making and systematic state intervention in the economy. According to the concept of “organised capitalism”, there is an “organised interdependence of state and economy”. Although this concept can be of some help as a heuristic device, it is misleading if it is applied to explain the economic, social and political reality in Germany in the late nineteenth and early twentieth century. There are some distinct ideological overtones implied in this concept and it is difficult to prove a transition from a “capitalism of free competition” to an “organised capitalism”.¹¹

Another label which is often attached to the period under consideration is that of the “Great Depression”, which is supposed to comprise the years between 1873 and 1896. The cyclical upswing between 1869 and 1873, which was enhanced by the inflow of French reparations after the war of 1870/1, ended in the Gruenderkrise (foundation of the Empire crisis). From 1874 to 1879 net national income decreased by 15 per cent and Germany’s decision to adopt the gold currency resulted in deflationary tendencies.¹² From 1876 to 1896 German wholesale prices fell by 2.2 per cent annually, while the cost of living showed an annual fall of 0.5 per cent. Considering the increases in productivity during the industrialisation period this development was quite normal.¹³ There was indeed a sharp recession in the period 1874 to 1879, but after 1880 German industrial production increased, although with cyclical fluctuations. During the years 1880 to 1896 real growth was about three per cent, the same as in the following period 1896 to 1913. It is therefore highly problematic to apply the term “Great Depression” to the period 1873–96. From 1871 to 1913 nominal wages rose by about 1.6 to 1.9 per cent annually, the growth figures of real wages vary between 0.7 and 1.4 per cent.¹⁴ Economic growth in Germany continued until the outbreak of the First World War, although there were recessions in 1900 and 1907.

In foreign trade Germany’s share of the world market increased from 11 to 13 per cent between 1880 and 1913, while that of the other great powers stagnated or decreased. At the outbreak of the First World War Germany’s export share amounted to 20.2 per cent. This impressive performance was often praised by contemporary German observers, but it also had a negative side to it: a marked dependence on the vagaries of the world market in a period of increasing world-wide protectionism. German’s trade was to a large extent with industrial nations. Between 1890 and 1913 direct investment overseas played an increasing role. In the first years of the twentieth century Anglo-German trade rivalry became keener.¹⁵ Around 1890 German industrial production had only amounted to two-thirds of the British, and her share of world trade was only half that of the British.

By 1913, however, Germany had overtaken Britain in industrial production and had almost drawn level with Britain in foreign trade. Britain was, however, still the leading trading nation in the world. Her capital exports surpassed those of Germany, the same goes for shipbuilding and the exports of textiles and textile machinery.¹⁶

There were also problems with France. In this country a “defensive nationalism” tried to check German economic expansion from 1911 onwards.¹⁷ On the basis of her recently gained economic strength, Germany pursued a foreign policy which, although not deliberately aiming at war, nonetheless accepted the risk of a European war.¹⁸ Internal socioeconomic conflicts also played a major role in this. The main conflict existed between the old and new socioeconomic elite in agriculture, commerce and industry—whose interests were, however, not uniform—on the one hand, and the industrial working class on the other. The latter was only “negatively integrated” into the state¹⁹ with no freedom of association; a parliamentary system as in the Western democra-cies of the time was lacking. Financial policy, which overtly favoured the propertied classes by increasing indirect taxes, deepened the already existing antagonism.²⁰ Nationalism of the masses and the creation of the image of a beleaguered fortress—the German Reich—encircled by aggressive powers seemed to be a way of easing social tensions at home by directing them towards foreign enemies. The rhetoric of a “preventive war” led to the battlefields of 1914–18. Although an interpretation of German policy along these lines has much to commend it, it should be taken with more than a grain of salt.²¹

Notes

1 . For this and the following see V.R.Berghahn, Modern Germany. Society, economy and politics in the twentieth century (Cambridge University Press, Cambridge, 1982), pp. 1–9; Karl Erich Born, Wirtschafts- und Sozialgeschichte des Deutschen Kaiserreichs (1867/71–1914) (Steiner, Stuttgart, 1985); Gerd Hardach, Deutschland in der Weltwirtschaft 1870–1970. Eine Einfuehrung in die Sozial- und Wirtschaftsgeschichte (Campus, Frankfurt, New York, 1977), pp. 32–9; Dietmar Petzina, Die deutsche Wirtschaft in der Zwischenkriegszeit (Steine...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Figures
• Tables
• Introduction
• Editor’s Introduction
• Part I: 1871–1948
• Part II: The Federal Republic of Germany 1949–1985
• Select Bibliography